Optimist’s guide to pessimism
The latest GDP numbers, surprising the experts, favour a glass-quarter-full view of SA’s embattled economy
Perceptions of the SA economy are generally negative and understandably so. South Africa’s underperformance over the past 15 years has been truly spectacular. The country’s average real GDP growth since 1980 has been around 2.1% per year. That’s less than advanced economies, the world, emerging markets (obviously), and sub-Saharan Africa.
Yet there is a way of understanding the SA economy from the glass-a-quarter-full point of view, which was on Technicolor display when Q3 GDP growth surprised massively on the upside. Quarter-on-quarter growth came in at 1.6%, which is hardly spectacular and is partly a bounceback from 0.7%.
But here is the interesting thing: the median of 12 economists’ estimates in a Bloomberg survey was growth of 0.4%. Before the latest figures, there was discussion about a possible “technical” recession, two consecutive quarters of contraction.
It’s always a bit satisfying when economists get things so wrong, because they tend to be fabulously smart. Economists are almost always right in the long term but, still, this is a spectacular miss. Are we all just too gloomy for our own good?
I think two things affect South Africa’s judgment negatively and sometimes they overshadow a more holistic view of the economy. The first is load shedding. I suspect what was really weighing on the minds of economists was the dramatic increase in blackouts this year. That has to have an effect on growth, doesn’t it?
Turns out, not so much. I suspect that South Africans, ever a resourceful bunch, are beginning to find workarounds. One of the two surprise sectors this quarter was manufacturing, which you might have expected to be badly affected by load shedding but grew by 1.5%.
Sadly, and wonderfully, we seem to have managed to install alternative energy sources (alternative to Eskom at least) in most of the productive parts of the economy. This is not good for our lifestyles, but it does mean the economy is possibly getting more resilient vis-à-vis Eskom than it was.
The second issue that tends to overshadow SA’s economic prospects is politics. I don’t mean just that SA’s middle class is extremely bitter and angry at the ANC, although there is some of that (one of my colleagues this week likened it to an abusive relationship).
It’s more that the narrative of SA’s politics is so unrelentingly grim that you expect the economy to be more affected than it is.
But the government has for years now been the most marginal contributor to the economy and, gradually, its functions are being taken over by the private sector, which is doing a pretty good job of it. To name a few: education, health and security are all sectors where we have seen dramatic private-sector growth, all at the expense of the government.
I was amused to read recently that clothing store PEP’s store-to-store delivery service, Paxi, had delivered 4.2 million parcels in the year to September. That’s 11,500 parcels a day. It’s cheap, reliable and fast. You get SMS messages! It’s everything the Post Office should be but is not.
You can see the trend in these GDP numbers: government spending and fixed investment climbed 0.5% and 0.3% respectively, quarter-on-quarter, way below almost every other sector. And that’s a good thing because it means this growth is not debt-heavy; growth in government spending is now almost always funded by more debt. The simple fact is that government is becoming less important economically, a trend disguised a bit by its dramatically increased importance during the Covid period.
The big surprise was agriculture, which really spiked and was up 19.2%, which has a knock-on to improved trade stats. Mining is also holding up against lots of pessimism. All this means the economy is now a bit larger than it was in 2019 before the pandemic.
Of course, remember this is a glass-aquarter-full point of view. For SA to start improving its unemployment rate, it needs a 5% real growth rate and the last time we got that was 15 years ago. The general consensus view is that none of this can last. Even more load shedding in Q4, higher inflation, less supportive commodity prices and lower global growth mean the future is bleaker.
But, you know, keep an eye on the bottom quarter of the glass – it may be fuller than you realise.